The recent DeepSeek announcement disrupted the AI landscape, triggering widespread debate and a historic stock market reaction. DeepSeek is a generative AI platform like ChatGPT, designed for text generation, code writing, and problem-solving using advanced machine learning. NVIDIA, a company specializing in graphics processing units (GPUs) and artificial intelligence (AI) hardware, saw its stock drop amid growing competition in the AI space. NVIDIA’s GPUs are the backbone of AI development, powering platforms like OpenAI’s ChatGPT and countless enterprise applications, making this company a key player in the tech industry. However, with new challengers emerging, investors question whether NVIDIA’s dominance is at risk. NVIDIA lost nearly $600 billion in market capitalization marking the largest single-day value wipeout in stock market history.
What exactly does this mean and why should the average person care? AI is no longer a futuristic concept, it shapes daily life, from personalized recommendations to cutting-edge language models. NVIDIA has been instrumental in this transformation, providing the hardware for many AI applications. It is estimated that Nvidia controls between 70% and 95% of the market for AI chips used for training and deploying models like OpenAI’s GPT. Nvidia’s 78% gross margin highlights its strong pricing power, an exceptionally high figure for a hardware company that manufactures and ships physical products.
Hence, the emergence of competitors like DeepSeek, which developed an advanced AI model at a fraction of the typical cost, actively challenges NVIDIA’s dominance. This shift could democratize access to AI technology, making it more affordable and widespread. However, it also raises questions about who controls this technology and how it will be used. For consumers, this could mean more diverse and accessible AI-driven services, but it also emphasizes the importance of understanding the entities behind these technologies and their potential impact on society.
DeepSeek is known to have utilized older models of NVIDIA chips, as the Chinese government places heavy restrictions on the export and import of newer technologies. As reported by AI engineer Sab Severino, DeepSeek’s AI models are outperforming expectations by using 50–75% less energy than their U.S. counterparts, such as Meta and NVIDIA. This demonstrates that advancements in AI can be driven not just by expanding data centers, but by optimizing algorithms for efficiency.
This decision is also bringing attention to the growing concern about AI’s environmental impacts, particularly as large-scale AI models require vast amounts of energy to train and run. This often leads to significant carbon emissions associated with powering data centres, which are typically reliant on fossil fuels. DeepSeek’s energy-efficient approach suggests a potential shift towards more sustainable practices within the AI industry. If more companies adopt similar strategies, it could help reduce the carbon footprint of AI technologies and promote more environmentally responsible innovation.
Ultimately NVIDIA’s stock crash raises questions and challenges the current market structure. A loss in consumer confidence, growing competition from emerging AI companies, and a rise in environmental concerns about the sustainability of AI models. As competition intensifies, the AI industry faces a critical crossroads, balancing innovation, corporate dominance, and sustainability in the race for artificial intelligence supremacy.
Edited by Alexandra MacNaughton
Anvita Dattatreya is in her third year at McGill University, currently pursuing a B.A. Double Majoring in Economics and International Development Studies. As a staff writer in Catalyst she hopes to write articles on topics including socio-economic and political issues in South-East Asia.